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#140 – TikTok subsidizes Black Friday, deepfake influencers, & Affirm+

by | Sep 25, 2023 | Recent Newsletters

Remember when Amazon launched as an online bookseller with Jeff Bezos and his friends fulfilling the orders themselves in his garage?

Little did they know at the time that 27 years later, Chinese behemoths would enter the scene with multi-billion dollar budgets to subsidize the cost of goods in the name of market share. We've come a long way. 

This week I've got stories for you about TikTok's bold Black Friday promotion, AI deepfake influencers taking over livestreams in China, and Affirm (potentially) launching a subscription. 

I also cover Mastercard's letter to US Congress, Google's new checkout journey report, and even more new fees from Amazon headed your way.

All this and more in this week's 140th Edition of Shopifreaks. Thanks for subscribing and sharing!

Stat of the Week 📈

Both Shein and Temu trail significantly behind Amazon when it comes to conversion. Shein and Temu hover around 5% conversion, while Amazon is much higher at nearly 12%. – According to Business Insider

Share this week's stat on X & LinkedIn.

1. TikTok subsidizes Black Friday

In a bold move to attract US shoppers this holiday season, TikTok is planning to subsidize Black Friday discounts as high as 50% for its sellers.

That's a move straight out of Temu's playbook, which as you might recall, I reported in May was losing an average of $30 per order trying to break into the American market.

TikTok's goal is to move $20B worth of products this year worldwide, and hopes that the holidays will play a big role in it hitting that number.

The company thinks that by subsidizing Black Friday discounts, e-commerce companies gearing up for the holidays will consider last-minute shifts in how they allocate ad spend.

And they certainly might! At minimum, companies might throw their 1.3% Twitter budget at TikTok instead to test the waters. 

TikTok definitely needed to play a big card in the US to scoop up market share this year, given how late they already are into the season. Last week I reported that TikTok Shop just now finally debuted in the US, at a time when most large companies have already finalized their holiday discounting and promotion plans.

The official Black Friday deals will start 8pm on Nov 23rd, and deals for Cyber Monday will run from Nov 28th to Nov 30th.

Will your company be taking part in TikTok's subsidized deals? Hit reply and let me know. 

2. Deepfake Chinese influencers

AI generated influencers are taking over Chinese livestream platforms to sell you junk at any hour of the day or night. 24/7 non-stop streams without breaks to drink, eat, sleep, or use the bathroom like us inefficient humans.

As new technologies have allowed for the creation of realistic avatars, voices, and movements, the popularity of these deepfakes have exploded across China's e-commerce streaming platforms like Taobao, Douyin, Kuaishou, and others.

With just a few minutes of sample video and $1,000, brands can clone a human streamer to work 24/7/365.

A Nanjing-based startup called Silicon Intelligence, which launched in 2017, says it first started to see AI's potential as a livestreaming tool in 2020. Back then the company needed 30 minutes of training videos to generate a digital clone. The next year it was 10 minutes, then three, and now only one minute of video is needed.

Everything about the process has gotten easier too, including writing the scripts — a task that used to be performed by humans can now be outsourced to ChatGPT and other large language models. 

Huang Wei, the director of virtual influencer livestreaming business at Xiaoice, says that the deepfake clones won't be able to beat the star e-commerce influencers, but they are good enough to replace mid-tier ones. 

Not great news for up-and-coming livestream hosts in China, who've already seen the average salary for livestream hosts drop 20% compared to 2022.

Xiaoice currently has over 100 clients using its virtual streamer service now, and the deepfake influencers have brokered millions of dollars in sales.

3. Mastercard blasts the CCCA

In August I reported that a bill in Washington was pitting retailers like Amazon, Walmart, and Target against credit card processing networks like Visa, Mastercard, and Discover.

The Credit Card Competition Act is actually an old bill that was proposed a year ago, but never brought up for a vote in either the House or Senate, and is now being reintroduced via a bipartisan push to clamp down on credit card fees.

The measure aims to bolster competition for the credit card processing industry by requiring big banks to allow at least one network that isn't Visa or Mastercard to be used for their cards, giving merchants who pay interchange fees a choice they otherwise rarely get. It also stipulates that Visa and Mastercard can only account for one of the choices as a way to prevent the two largest networks from being the only options offered to merchants.

Last week Mastercard wrote a letter to several members of Congress, outlining its opposition to the CCCA. Mastercard says: 

  • The rumors are false! It is NOT increasing US interchange rates this fall and never had plans to do so. 
  • Despite incorrect accusations, interchange rates are not skyrocketing, but are actually “remarkably flat.”
  • The payments industry has never been more competition, and Mastercard is now up against BNPL, P2P payments, real-time payments (including from the Federal Reserve), digital currencies, digital wallets, and open banking companies.
  • It's “incomprehensible” that American Express, the second largest credit card issuer in the US, would be excluded from the act, given that they extend more than $1 trillion in consumer credit and charge merchants the highest average rate in the US.
  • According to Morning Consult, four out of five consumers believe they have a choice in payments.
  • Mastercard invested more than $7B over the last five years to support cybersecurity and identity capabilities that protect payments and digital interactions, which has prevented more than $20B in fraud.

Mastercard ended the letter by saying, “Competition has made this country great. It has inspired individuals and companies to think big and drive innovation. However, the Credit Card Competition Act will thwart the competition you seek to protect. The legislation will remove consumer choice, erode security, eliminate rewards, and dramatically prevent small businesses from investing in their future. Competition is threatened when policy is made in the absence of facts.”

Congress collectively responded by asking, “Now is Mastercard a browser or a search engine?”

4. One+, Two+, Three+, Affirm+

Affirm is exploring the introduction of a subscription service called Affirm Plus in a desperate attempt to get fully acquired by Shopify.

(Kidding. Or am I?)

The potential service aims to offer upgrades for its BNPL users and savings account holders including:

  • The guarantee of a 0% APR on installment loans up to $2,500 (which typically range from 0% to 36%)
  • Unlock a higher interest rate for savings accounts, with a promised APY of 4.75% (higher than Affirm’s current rate of 4.35%)

The service was discovered inside code hidden within its iPhone app, which indicated that Affirm is looking at charging $7.99 per month for Affirm+. 

Last week I reported that senior VP of finance, Rob O'Hare, said at a conference that the Affirm has been using warehouse facilities which could result in its funding cost rising.

In February, I reported that Affirm was going around having one-on-one meetings with merchant clients seeking permission to raise their rates because their initial agreements did not include an automatic mechanism for dealing with rate increases by the Federal Reserve. 

Given the current lending environment, Affirm may be looking for ways to diversify its revenue streams and mitigate the impact of these increased costs — but do consumers need yet another subscription?

5. Google Checkout Journey

Google launched a new report within GA4 called Checkout Journey to help brands identify checkout problems.

The report displays the count and percentage of users who initiated checkout within an e-commerce site or app and then subsequently completed (or didn't complete) each step in the checkout process.

The report is designed to pinpoint bottlenecks in the checkout process and help brands resolve the issues.

In order to view data in the Checkout Journey report, brands must enable checkout events including:

  • begin_checkout: This populates the Begin checkout step.
  • add_shipping_info: This populates the Add shipping step.
  • add_payment_info: This populates the Add payment step.
  • purchase: This populates the Purchase step.

Some of those events are automatically added by platforms like Shopify, but others like “add_shipping_info” need to be manually added. 

Results of the report can also be filtered by browser, city, country, device category, language, and region to get a more granular look at who's abandoning checkout midway through.

6. Amazon: to fee or not to fee

Amazon is adding fees in every direction lately, but it admittedly may have gone too far with one. 

The company is now scrapping its plan to charge a 2% fee to merchants who ship products via Amazon’s Seller Fulfilled Prime program, which was supposed to take effect on Oct 1st. 

Amazon attributes the decision to merchant feedback, but others speculate that the reverse course is due to an escalating antitrust investigation.

But that isn't stopping the company from adding fees elsewhere: 

#1) Starting in early 2024, Amazon Prime Video in US, UK, Germany, and Canada will include advertising during shows and movies, followed by France, Italy, Spain, Mexico, and Australia later in the year.

However Prime Video members can optionally pay an additional $2.99 / mo to keep the service ad-free.

This brings Amazon up to par with other streaming services including Disney, Netflix, and Hulu, which all charge more for subscriptions without ads.

#2) Amazon will begin charging users $2/month to use their Echo Show 8 Photos Edition as a digital photo frame.

Currently, you can activate a photo frame mode on older Echo Show displays, but it goes away after three hours and returns to the rotating display that often shows ads.

So basically Amazon is charging $2/month not to see ads, more than it's charging to see your photos

This move, in my opinion, is the embodiment of what consumers hate about hardware subscriptions. It's the equivalent of BMW charging a subscription fee to activate heated seats in your car.

There needs to be regulation against these types of hardware subscriptions, as well as regulation that empowers customers to TURN OFF ADS on hardware that they own! But that's a topic for a different day…

In the meantime, Amazon should tread lightly on imposing new consumer-facing fees. There's already a growing sentiment among consumers that Amazon Prime doesn't unlock as much value as it used to. Raising the price in a nickel-and-dime fashion certainly isn't going to relieve that tension.

It's also one thing to raiser fees for sellers, which Amazon has done quite a bit of recent years. Buyers don't actually see those fees. They're simply absorbed into the cost of the products they buy on Amazon Marketplace. That's a lot easier to hide, and most consumers blame “the economy” and “inflation” instead of Amazon when it does happen.

However tackling $2.99/month to Prime Video and $2/month to hide ads on a customer's Echo device isn't going to win Amazon any accolades with their customers. Those consumer-facing fees hit harder.

Get ready though, because even Amazon execs say that more subscription fees are on the horizon.

7. Shopify Audiences expands

Shopify is expanding the reach of its merchant advertising tool Audiences to include all major advertising platforms including Snap, Criteo, and TikTok. 

Audiences, which Shopify launched in May 2022 with the goal of helping brands identify and reach customers on their preferred advertising networks, initially launched with Facebook and Instagram, and later expanded to include Google and Pinterest. Now it's added three more networks. 

In addition to the new network partners, the upgraded Audiences tool now lets merchants benchmark their campaign performance against other similar merchants.

Shopify wrote, “As the number of merchants who use Shopify Audiences grows, the algorithm becomes more impactful by leveraging unique insights from shoppers across participating merchants. This in turn improves performance, and so a positive feedback loop forms.”

Shopify went on to say that leveraging Audiences is proving to be a primary reason merchants are upgrading to Shopify Plus, with many adding Shopify Audiences on average just a week after their upgrade.

8. Facebook's timely AI characters

Meta is aiming to attract younger users to its social networks with witty AI chatbots, but critics are saying they missed the mark on resonating with Gen Z.

And I can see why they're saying that! Meta's choice of AI characters are a bit… dated to say the least. 

Fred Flintstone, Bozo the Clown, Mighty Mouse, Woody Woodpecker, Pee Wee Herman! Okay, they're not quite that dated, but close to it… 

There's “Bob the Robot” which is a chatbot based on the character Bender from Futurama — who's meant to be sarcastic, sassy, and slightly sardonic.

One Meta employee told WSJ, “Him being a sassy robot taps into the type of farcical humor that is resonating with young people.” — which makes me think of that scene from 30 Rock, “Hello fellow kids.”

Other characters include Alvin the Alien, who asks invasive questions about your experiences on Earth.

Snapchat also has an AI chatbot called My AI, which since launching in February, Gen Z users have turned into a trend of purposely torturing the bot by giving it stressful prompts and posting them to TikTok.

While it's likely that the same could happen with Meta's AI characters, it's even highly likelier that Gen Z won't even use them. 

9. Other e-commerce news of interest

TikTok is adopting the use of a self-attributing network to report conversion data to advertisers, in place of its existing last-click attribution model, which puts it similar to Meta and other networks. The measurement reporting will still run through a group of approved third-party providers like Kochava, AppsFlyer, Singular, and Adjust, but TikTok will provide the data through its platform.

Tinder introduced a new VIP subscription called Tinder Select that costs $500/mo and only offered to 1% of its most active users. Users need to apply and meet a 5 Point Select Screen.

Wix integrated with Microsoft's IndexNow, an open source protocol that allows website publishers to instantly index across participating search engines including Bing, Yandex, Seznam, and Naver, among others. The integration is platform-wide and does not require additional steps from website owners to get started.

Mastercard predicted retail sales increasing 3.7% this holiday season for in-store and online sales across all payment forms, but the number is not adjusted for inflation, which means actual growth could either flatline or decline. The report says that retailers should prepare for a pullback, as financially stressed families grow more cautious about spending. 

BigCommerce launched B2B Edition Invoice Portal, which aims to modernize the invoice payment process for large B2B suppliers, manufacturers, distributors, and wholesalers. The new functionality incorporates invoice payments into a centralized purchasing workflow so that buyers can see and pay all invoices in one place.

FedEx is launching Picture Proof of Delivery in Europe in cases where signatures are not required. Uh oh, have porch pirates made it across the sea to Europe? The feature will provide customers with a photo showing the exact location of their package once it is delivered to their doorstep or another safe location.

WhatsApp India partnered with PayU and Razorpay to add support for payments via credit and debit cards, net banking, and all UPI apps in the country. Customers can now pay businesses within a WhatsApp chat using their preferred payment method. WhatsApp partnered with Stripe earlier this year for the same feature in Singapore and has offered peer-to-peer payments in Brazil since 2020.

Sezzle and WooCommerce expanded their partnership to provide merchants with an easier integration for BNPL. Eligible merchants can now integrate Sezzle’s payment solution into their online stores through the WooCommerce backend with just a few clicks.

Walmart opened its first-ever Pet Services center in Dallas, Georgia, as part of its mission to offer affordable access to pet services. The center will offer vaccines, wellness exams, minor medical services, baths, nail trims, teeth cleaning, ear cleaning, basic hair trims, and a self-serve dog wash. I've seen some Walmart shoppers who could use that last one.

90% of Gen Z are optimistic about AI improving online shopping for product selection, price comparisons, and more. 55% say they're interested in an AI assistant to help them find products to purchase.

FedEx revenue declined to $21.7B, down from $23.2B a year ago, but operating income grew to $1.49B from $1.19B in the same period. FedEx attributed the higher margin and profitability to its cost-cutting measures including reducing flights and making first and last-mile deliveries more efficient.

Apple's Tap to Pay is now available in Brazil for the first time, marking the sixth country to support the feature. Vendors can now receive contactless payments using just their iPhones, which support Apple Pay as well as contactless credit and debit cards.

Speaking of Tap to Pay, Wix now supports the feature on Android in the US through a partnership with Stripe. Wix added support for Tap to Pay on iPhones six months ago.

DHL eCommerce opened a fully-owned 307,000 sq.ft. distribution center near the CVG International Airport after consolidating three of its properties in the area. The $74M facility is equipped with a Honeywell cross-belt loop sorter that can process up to 50k parcels per hour, plus a dual lane sliding shoe sorter designed to process up to 24k parcels every hour.

Walmart added the ability for customers to subscribe to automatic replenishment of frequently bought items like toilet paper, diapers, and dog food — “just 16 years after Amazon” according to Business Insider. LOL. Funny / harsh, but true. Items ordered through subscriptions are eligible for free shipping on orders over $35 or free for Walmart+ members.

Klevu and BigCommerce took their relationship to the next level, in what they're calling an “Elite Partnership”, aimed at helping merchants leverage Klevu's AI-powered product discovery platform. The two companies are aligning their resources and investing in job training programs for customer success, sales, and support teams to help merchants derive value from both platforms.

The USPS Board of Governors announced it would not fully fund the Postal Regulatory Commission for 2024, offering a 10% cut to their initial ask. The PRC responded to the announcement by claiming that limiting the budget “will reduce the resources that the Commission can dedicate to providing transparency into DFA and overseeing the Postal Service's performance.”

Meta and OpenAI individually filed motions to dismiss the class-action lawsuit filed by Sarah Silverman, Richard Kadrey, and Christopher Golden for alleged copyright infringement, except for the direct infringement claim, which both plan to contest later as a matter of law. OpenAI claimed that the authors “misconceive the scope of copyright, failing to take into account the limitations and exceptions (including fair use) that properly leave room for innovations like the large language models now at the forefront of artificial intelligence.”

Snapchat+ has surpassed 5M users, up from 3M in April, and halfway to its goal of 10M. The service costs users $3.99/month and offers perks like a unique app icon, in-app customizations, account metrics, and tools like the ability to boost posts and check how frequently people watch your stories. 

Instagram's ad spend is predicted to reach $70.9B in 2024 if the current trend persists, surpassing Facebook in terms of total ad spend. Instagram's ad spend was only around $3.4B in 2017 and grew to $48.3B by 2021. 

Amazon introduced a new version of its Just Walk Out technology that is designed for apparel retailers. The previous system leveraged a combination of ceiling-mounted cameras, shelf sensors, and computer vision techniques to track purchases, while the new system adds RFID tags attached to clothes, shoes, hats, and other items.

Amazon is planning to hire 250k employees this holiday shopping season at hourly rates ranging from $17 to $28 per hour as it seeks to recruit and retain workers amid a labor shortage. Some new hires will be eligible for bonuses ranging from $1,000 to $3,000.

Headline Prediction 2024: “Holiday workers are claiming that Amazon let them go right before their bonuses became due.”

IKEA introduced its first in-store and online BNPL payment option in the US in partnership with Afterpay, allowing customers to pay in four installments over a six-week period. IKEA says that the solution helps fill the gap for customers who either don't want traditional credit cards or don't qualify for them. 

Uber Eats will begin accepting food stamps and healthcare benefits as payment for grocery delivery orders. SNAP recipients and customers with health insurance-issued FSA and flex cards will be able to use their benefits to pay for grocery delivery. Instacart, Walmart, Kroger, and several other grocery delivery services also accept food stamps. 

Alyssa Henry, the CEO of Square, will step down from the position in October, to be replaced by founder Jack Dorsey, whose current title is Block Head and Chairperson. The reason for Henry’s departure was not made clear.

10. Seed rounds, IPOs, & acquisitions

Amazon will invest up to $4B in Anthropic, the San Francisco-based startup behind the Claude-2 large language model, just as the company gears up to develop an advanced foundation model called Claude-Next that could be too hardware intensive for even the world's fastest supercomputers.The investment from Amazon will help the company cover the model's steep development costs. 

Klaviyo climbed 9.2% during its IPO after topping its goal to raise $576M. The stock initially rose as much as 32% before closing its opening day at $32.76. 

Instacart shares popped 40% to $42 during its IPO, but then sold off throughout the day to close at $33.70. Shares continued to slump almost 11% in their second day of trading, leaving it just above its initial public offering of $30/share.

Secret Sales, the UK-based marketplace that sells discounted items to prevent stock from becoming waste, acquiredDreivip, a Spanish online shopping club and fashion retailer with 2.7M users. The two companies will collaborate with the launch of a co-branded website featuring approximately 450 brands. 

Mesh Connect, a startup that provides a system for enterprise businesses to manage digital assets, raised $22M in a Series A round led by Money Forward Inc, bringing its total amount raised to $32M. Mesh was founded in 2020 as Front Finance, but recently rebranded itself as it pivoted to an enterprise-focused platform.

ANKA, a Côte d'Ivoire-based SaaS e-commerce platform for African businesses, raised $5M in a pre-Series A extension as a mix of equity and debt, bringing its total amount raised to $13.5M. The company will use the investment for product development and to expand services in key markets like Nigeria, Kenya, and the US.

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See you next Monday,


Paul E. Drecksler
[email protected]
LinkedIn | Reddit

PS: I'm thinking about launching a plant startup. I just need some seed money.